Dollar$ & $ENSE

Dollars & Sense strives to provide key insights for successful common interest community (CIC) finances.

Dollar$ & $ense Article Library

The following links highlight DOLLAR$ & $ENSE articles from our CIC Info Bytes newsletter.

Since the start of 2019, Americans have lost out on at least $291 billion in interest by keeping their savings in the five biggest banks. That total balloons to $603 billion when going back to 2014, when the FDIC started tracking consumer deposits in money-market and other savings accounts.  Why haven’t savers moved more of their money?

…”for years people like me have been telling you that advisers have to disclose much more about themselves than stockbrokers do, so you can make better-informed decisions about their services and integrity… however, that isn’t always true. In some ways, financial advisers have to disclose less than brokers do—and what they don’t tell you could hurt you.

Definitions you NEED to Know!



Annual Budget 1-2-3



While ultimately subject to your state statutes, most states do not prescribe the exact process to analyze, review and approve your annual budget.  Lack of an exacting legal prescription leads us to many great examples of accountable, transparent budgeting processes that engage constituents (your homeowner members).   Process matters!  View a detailed checklist below on this page.

What's in an Annual Operating Budget?

Annual operating budgets are line-item groupings of estimated dollar costs broken down into buckets that "make sense."  Porta-potties are a line-item expense for a specific event, not a line-item for your annual operating budget.

Budgets typically include REVENUE line-items followed EXPENSE line-items broken down something like this:

What to Know: US Treasuries, I-Bonds & Brokered CDs


Upcoming US Treasury Auctions | Current Fixed Income Yields (Bonds, CDs Munis)




HOW Can You Invest CIC Funds?


Many state CIC statutes require reserve funds to be in "income earning" accounts, but the "income earning" requirement does not prohibit investment in corporate or municipal bonds, stocks and/or other securities.  Warren Buffett advises investors to “avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics.”

Volunteers often have no professional experience managing money for others.  For that reason alone, every organization should establish a written investment plan that requires the discretion of the Board to vote and that clearly establishes priorities and risk tolerance.    

IRS, Taxation, & Why Your Association is NOT a 501(c)(3)

Your Association COULD potentially qualify as a 501(c)(4) or 501(c)(7)

First, read this and this from the IRS. Then read 26 U.S. Code § 528 - Certain Homeowners AssociationsView the various types of 501(c) designations.

READ 501(c)(what?)

501(c)(3) status will NOT become a reality for you.  Donations to your association are NOT tax deductible.

Below is a memo from Gary Porter, CPA.  Read more about Form 1120 and 1120-H.

By way of background I am a CPA who has assisted more than a hundred associations obtain exempt status and have fought the IRS Appeals office and won more than twenty times.  I'm also the CPA who wrote the book that virtually all CPAs practicing in the community association industry use as their primary technical guidance on accounting and tax matters.  I also have the dubious distinction of having provided consulting on more than 70 IRS audits of associations - only two of those for tax returns I prepared.

For this conversation I refer you to two websites our firm maintains that are intended as information resources only, purposely kept separate from our firm website. 

This topic continues to be of interest and I have spoken at CAI's Law Seminar on this topic three times over the last decade or so.  The reasons why most associations seek exemption under IRC Section 501(c)(4) are generally (1) safety and (2) tax savings.

Safety is in the form of avoiding the tax risks inherent in filing Form 1120 and most of the associations seeking this safety cannot qualify to file Form 1120-H because of the extensive lifestyle programs provided by the community.  Many of these associations are communities of several thousand homes with extensive recreational programs.

Tax savings are realized because interest income and capital gains are not taxable to 501(c)(4) organizations.  Another factor is cell tower lease income which is taxable on either Form 1120 or 1120-H.  But, if those cell towers provide signals outside the geographic area of the association then they are providing a public benefit - that makes this activity a core exempt purpose activity and the income tax exempt. 

Only 501(c)(3) organizations can deliver a tax deductible benefit to members for their dues payments.  As was pointed out, I am aware of only three associations in the US that have successfully qualified - one in Florida, one in Nevada, and one in California.  This is so rare as to not even warrant conversation.

In my CPA practice I spend too much time educating IRS agents as to what the law and related rulings and court cases mean for exempt associations.  Their training material trains them that "public access" is the ONLY criteria.  That is a blatant misinterpretation of the law which clearly states that "public benefit" is the primary factor and they are not the same thing.

Regarding the proposed capital contribution by members to the association that is something that we see on a regular basis. in our association client base  because of the types of associations that we represent - many large associations spread through 22 states.   Virtually all such contributions would qualify as capital contributions under IRC Section 118 so would not be taxable to the association.  This is the same code section that allows your reserve contributions (for capital expenditures only) to avoid taxation.  Below is a link to an article on our website that addresses code section 118.  I have written more than 400 articles over the last four decades but this article has always been the most popular having been read more than 40,000 times.

Gary Porter,

CPA Porter & Lasiewicz CPA


The Community Association Dollars & Sense Checklist


Washington State BUDGET Requirements Checklist


Washington State Budget Ratification Notice Template
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